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Deciding to Buy?

Buying a home is a dream for many people. Making that dream a reality can be a tumultuous, yet exciting experience. There are many aspects to consider before making that commitment. Here are five steps to get you started on that process.

Step 1: Consider whether owning a home is your goal

This is an important, but often overlooked step. Buying a home can be a very rewarding experience, but it can also be baked in to what we feel we are "supposed" to do. Are you living someone else's dream or do you really want to own a home? Are you defaulting to what is expected or do you desire to call a place your own? It's crucial to think through why you want a home in the first place. This should help reveal whether you are trying to fulfill expectations that are not your own. If you decide that owning a home is really what you want, read on!

Step 2: Research your options

Start looking around neighborhoods you might be interested in to get a sense of where you'd like to live and what you'd like your home to be like. Research the real estate market to get a sense of current news and trends. You may have better odds of getting a good deal if you don't have just one place in mind and instead have a few options you'd be happy with.

Step 3: Determine if you're comfortable with the non-financial costs

When deciding whether to buy a home, it is common to focus heavily on the financial costs and forget that there are other costs as well to consider. Some non-financial costs of home ownership can include:

  • Signing a long-term contract. Are you ready to commit to living in a certain location for an extended period of time? You can sell your home to move elsewhere, but it will cost you time and money to do so. You may have limited flexibility if you buy a house then decide to leave soon after. Renting your home is an option, but it creates more management work for you too.

  • Changes in the housing market. If you are looking at a house more like an investment than a place to live, you may become frustrated with the unpredictability of the housing market. Trying to time when to buy and sell houses can be as risky as market timing with investments or even gambling.

  • Managing your property. Unlike renting, as a homeowner, you'll be responsible for taking care of your property. You'll need to make sure everything adheres to certain standards set by laws and homeowners association agreements. This can cost money, but more importantly, can require your time and energy. It'll be another thing you will be responsible for. Is that something you are ready for?

Step 4: Determine if you can afford the financial costs

Some financial costs of home ownership can include:

  • Down payment. A down payment is the amount lenders require borrowers to put down before offering a mortgage. The amount can vary, but it is usually around 20 percent. Have you saved enough or are you willing to start saving regularly?

  • Monthly payments. With a mortgage, you'll need to make recurring payments each month for the next 15-30 years on average. The payments start out with more money going to interest than principal, which is a significant cost over time, but this is how most people can afford to buy their homes. Will your budget allow for this fixed payment? Are you willing to make the interest payments in order to get the funding you need to buy your house?

  • Insurance, maintenance, repair and remodeling costs. As a homeowner, you'll be required to get homeowners insurance and will be responsible for paying to keep up the property. You'll need to maintain your home, fix

    anything that leaks, cracks or goes wrong and you may even want to remodel sections of your house.


Consider whether you are willing to take on these costs in exchange for the benefits of owning a home. Renting is often seen as the greater evil, but it can actually be the smarter option in certain situations. Most of step three and four would not apply to someone who is renting, but there are costs to renting as well, such as paying money that you won't be able to get back.

Step 5: Review your credit

If you are financing a portion of your home purchase, your credit report and credit score will likely play a significant role in which loans you can be approved for and what the terms will be. Review your credit profile to determine where you are.

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